A letter of intent (LOI) to purchase real estate is a non-binding (or partially binding) document that outlines the proposed terms of a real estate purchase. It's the handshake before the contract — confirming both sides are aligned before investing in due diligence and legal fees.
When you need an LOI
- Buying commercial real estate — the LOI sets price, financing terms, and contingencies before the purchase agreement.
- Buying residential investment property — especially for off-market deals or complex transactions.
- Buying land — the LOI establishes development rights, environmental conditions, and zoning assumptions.
- Negotiating with multiple buyers — a signed LOI can include exclusivity to prevent the seller from shopping your offer.
Key terms
- Purchase price — the proposed price and any adjustments (escrow, earnest money, closing costs).
- Property description — address, parcel number, legal description.
- Financing — cash, conventional, SBA, seller financing, or contingency on financing approval.
- Due diligence period — how long you have to inspect the property (typically 15–30 days).
- Contingencies — financing, inspection, appraisal, title, and environmental.
- Closing timeline — target closing date and any extensions.
Binding vs. non-binding provisions
- Binding — confidentiality, exclusivity (if included), governing law.
- Non-binding — price, terms, contingencies (subject to definitive purchase agreement).
An LOI is not a contract. It's a negotiation tool. But if you include binding provisions (like exclusivity), you're committing to something. Make sure you understand which parts are enforceable.
What happens after the LOI
- Due diligence — the buyer inspects the property, reviews title, and confirms financing.
- Purchase agreement — the definitive contract replaces the LOI.
- Closing — title transfer, payment, and recording.
Make it legal
- Both parties sign.
- Each party keeps a signed copy.
- Attach it to the purchase agreement when negotiations conclude.
A state-specific LOI for real estate drafted to your transaction takes about ten minutes.